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Union of India (Uoi) & Others v/s Rattan Singh Gehlot & Another

    Civil Miscellaneous Appeal No. 342 of 1996

    Decided On, 18 December 1998

    At, High Court of Rajasthan

    By, THE HONOURABLE MR. JUSTICE BHAGWATI PRASAD

    For the Appellants: J.P. Joshi, Advocate. For the Respondents: M.C. Bhoot, Advocate.



Judgment Text

Bhagwati Prasad, J.

1. By this judgment I propose to decide these two appeals arising out of the arbitration award given by the arbitrator appointed in relation to contract agreement No. CEZ/JOD/20/D.F./1985-86. In relation to the appointment of the arbitrator there 'was some litigation and ultimately by the orders of this Court the appointment of the arbitrator was upheld. A challenge to the upholding of the appointment of the arbitrator is still pending before the Hon'ble Supreme Court. However, in the meantime the present appeals have become ripe for hearing and, therefore, they are being decided by this judgment.

2. The arbitration award was filed in the Court of learned Additional District Judge No. 3, Jodhpur. Before the learned Additional District Judge, the objections were filed by the Union of India under Ss. 30 and 33 of the Arbitration Act. The contractor contested by the objections and after considering the case of the parties, the learned Additional District Judge No. 3, Jodhpur decided the dispute in between the parties vide his judgment dated 16-4-1996. The parties have come before this Court against this judgment. In the appeal filed by the Union of India, the appeal concerns the award in relation to claim filed by the contractor under claim No. 5, 12, 14, 32 and 34 and the decision of the learned Additional District Judge. The appeal filed by the contractor relates to claim No. 13 and 31 of the claim petition as decided by the arbitrator and adjudicated by the learned Additional District Judge.

3. Learned counsel for the Union of the India has assailed the judgment of the learned Additional District Judge stating inter alia that the learned Additional District Judge has not appreciated the correct proposition of law. The award which was being considered by the learned Additional District Judge was a non-speaking award. There were no reasons available on the record. The arguments raised by and on behalf of the Union of India were not appreciated by the learned: Additional District Judge.

4. Learned counsel for the Union of India has relied upon a number of authorities. One of them is Union of India v. Ajit Mehta and Associates, Pune, AIR 1990 Bombay 45, wherein the proposition laid down by the Hon'ble Bombay High Court, following the decision of the Hon'ble Supreme Court, is that when an award is made in breach of the terms of the contract, it is illegal. The arbitrator cannot entertain claims and award them contrary to the express terms of the contract.

5. Another case relied upon by the learned counsel for the appellant is M/s. Prabartak Commercial Corporation Ltd. Vs. The Chief Administrator Dandakaranya Project and another, wherein the Hon'ble Supreme Court expressed complete agreement t

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o the observations of the High Court, wherein the High Court has held that Clause 14contained in the arbitration agreement had no application to the dispute in question, which fell under Clause 13A and, therefore, the arbitrator had no jurisdiction in the matter.

6. Learned counsel for the appellant Union of India has further relied upon a decision of the Bombay High Court in the matter of Union of India v. Shyama Charan Agarwala & Sons. 1997 (2) ALR 575 : 1997 AIHC 3053 wherein the Bombay High Court has interpreted Clause 11(c) of the General Conditions of Contracts for Lump Sum Contracts of Military Engineer Services and the Hon'ble Court following a Supreme Court decision has held that if the disputes referred to arbitration did not fall within ambit and scope of the arbitration agreement, the arbitrator had no jurisdiction to arbitrate and as such the resultant award is bad in law. The Court quoted the observations of the Hon'ble Supreme Court as under (at page 3062 of AIHC) :--

"that if Government expressly stipulated, and the contractor expressly agreed, that the Government was not to be liable for any loss occasioned by a consequence as remote as this, then that is an express term of the contract and the contractor must be tied down to it."

7. Clause 11(C) has been interpreted by the Court by saying that it records an agreement between the parties in categorical terms prohibiting admission of any claim by the contractors in respect of compensation or otherwise as a result of extensions granted under sub-clauses (A) and (B) of the said Clause 11. The Court held that in awarding any claim which was opposed to the provisions of Clause 11(C) the arbitrator had misdirected himself.

8. Learned counsel has further relied upon a Supreme Court judgment in the matter of Associated Engineering Co. Vs. Government of Andhra Pradesh and another,wherein it was observed that if the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. The Court further held that in the instant case, the umpire decided matters strikingly outside his jurisdiction. He outstepped the confines of the contract.

9. Learned counsel for the Union of India has urged that in deciding claims Nos. 5, 12, 14, 32 and 34, the learned Additional District Judge has not considered the implication of law and has approved,the findings of the arbitrator whereas they were clearly beyond his jurisdiction.

10. Learned counsel for the respondent contractor has urged that the proposition of law as canvassed by the learned counsel for the appellant Union of India is not correctly stated by him and the law in relation to a non-speaking awards is otherwise.

11. He has placed reliance on a decision of this Court rendered in the case of Union of india v. Ajmer Construction Company AIR 1997 Raj 65 wherein this Court has held that when the District Judge has examined the objections against the award, the High Court does not sit as a Court of appeal and this Court has further held that the arbitrator is not required to give any reasons unless and until required by the agreement.

12. Learned counsel has further relied upon a decision in the case of B.V. Radha Krishna Vs. Sponge Iron India Ltd., wherein the Hon'ble Supreme Court has held that whether a particular amount was liable to be paid is a decision within the competency of the Arbitrator. By purporting to construe the contract the Court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. In this judgment the Hon'ble Supreme Court has also observed that there is a distinction between the disputes as to the jurisdiction of the Arbitrator and the disputes as to in what way that jurisdiction should be exercised. Approving the earlier judgment of the Hon'ble Supreme Court, the Hon'ble Supreme Court in the judgment has said as under (at page 1328):--

"It is well known that the Court while considering the question whether the award should be set aside, does not examine the question as an appellate Court. While exercising the said power the Court cannot reappreciate all the materials on the record for the purpose of recording a finding whether in the facts and circumstances of a particular case the award in question could have been made. Such award can be set aside on any of the grounds specified in Section 30 of the Act."

13. Learned counsel for the contractor has also relied upon a case of the Calcutta High Court rendered in the matter of Union of India Vs. Abhoy Sarkar and another,wherein it has been observed by the Court that it is for the arbitrator to interpret the provisions of the contract and not for the Court to do the same.

14. Learned counsel for the contractor has further relied upon a Supreme Court decision rendered in the matter of State of Maharashtra Vs. M/s. Nav Bharat Builders,wherein the Hon'ble Supreme Court has held that a non-speaking award cannot be set aside when there is no error apparent on the face of it, especially where the liability is not denied and the dispute relates only to the amount awarded.

15. Learned counsel has further relied upon a decision of the Hon'ble Supreme Court in the matter of Hindustan Construction Co. Ltd. Vs. State of Jammu and Kashmir,wherein it has been held that a non-speaking award cannot be interfered with even if the interpretation of the contract by the arbitrator is wrong unless the contract itself is incorporated in the award or the award is without jurisdiction. The Court has further observed in this judgment that it has to be reiterated that an arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award.

16. Learned counsel has further relied upon yet another Supreme Court decision rendered in the case of Sudarsan Trading Co. Vs. Government of Kerala and Another,wherein the Hon'ble Supreme Court has observed that once there is no dispute as to the contract, what is the interpretation of that contract, is a matter for the arbitrator and on which Court cannot substitute its own decision. The Court has further observed in this judgment that it has to be determined that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised.

17. Both the learjied counsel for the parties have relied upon the respective decisions of the various High Courts and the Hon'ble Supreme Court. The position of law which emerges out of the aforesaid statements of law cited at the bar is that an unreasoned award is not bad ipso facto. In an unreasoned award unless it is noticed by looking at the award that an error has been committed by the arbitrator, no interference can be made. This is different from saying that when a challenge is made to the arbitration award by saying that the arbitrator has acted beyond his jurisdiction. In the words of the Hon'ble Supreme Court it has to be determined that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way the jurisdiction should be exercised. In the later cases the Court has no role to play but in the former cases where there is a challenge to the jurisdiction of the arbitrator the courts have been interfering. Thus, the present appeals have to be decided in this background.

18. The Union of India in its appeal has challenged the findings of the learned Additional District Judge on claims Nos. 5, 12, 14, 32 and 34. The challenge of the union of India in relation to claims Nos. 5, 14 and 34 approved by the Addl. District Judge is objected by the appellants on the ground that conditions of working as contained in Clause 21 (g) were not looked in by the Addl. District Judge and the award was confirmed. In terms of Clause 21(g) as and when run way is required by user at any time of any date whatsoever, run way was required to be made available for flying. The run way was made available for flying for the days for which the contractor had led the claim and therefore, he cannot be permitted to raise any claim in this regard. The arbitrator has gone wrong in awarding any claim in concerned to these claims. Learned counsel for the appellants raised objection regarding non-observance of the bar of Clause 11 (c) by the learned Additional District Judge. The prohibition contained in Clause 11 (c) ousted the jurisdiction of the arbitrator.

19. Learned counsel for the respondents has replied that before the learned Additional District Judge, Clause 21 (g) (3) was not elaborated-Mere mention of Clause 21 (g) in the objection is not sufficient. It was required under law that the appellants should have given details about 21 (g)'s application and all the details were required to be put forward in the objections regarding operational use of the run way by the user, and on that score, the amount was not liable to be awarded. In absence of a detailed summary of the events before the Additional District Judge, the appellants could not have canvassed before the Additional District Judge thalaward is bad. The pleadings and objections were, therefore, not comprehensive and therefore, no illegality has been committed by the Additional District Judge in deciding these claims. According to the respondents, the case of the appellants before the Additional District Judge was that the arbitrator has not considered Clause 21(g) and therefore award is bad. No case of misconduct has been made out in the pleadings, therefore, the Additional District Judge was not required to go into any details because they were never canvassed by the appel- lant before the Additional District Judge.

20. Thus, when in the light of the arguments of the learned counsel for the parties, the findings of the learned Additional District Judge are examined then 1 find that in paragraph 22 of the decision (which decides claim No. 5) it has been observed by the learned Additional District Judge that by looking at the relevant Clause it does not appear that the arbitrator has not looked into or applied his mind. From such observations, it cannot be said that the court has examined the implication of the prohibition pointed out to him. The Court should have at least discussed about the impact of Clause 21 (g). Obviously this treatment of the learned Additional District Judge is not judicious. The learned Additional District Judge was required to read the relevant provisions pressed into service before him and then see whether the clause was applicable in the facts and circumstances of the present award or not. Having not dilated upon the relevant provision Clause 21 (g) the decision of the learned Additional District Judge suffers from the vice of non-consideration and, therefore, the same is not liable to be sustained and is, therefore, set aside and for reconsideration on these particular claims, the matter requires to be remitted back. Similaris the case in relation to claims Nos. 14, and 34. These claims have been decided in the same fashion as claim No. 5 in paragraphs 31 and 41 of the decision. The same also deserves to be remanded.

21. Learned counsel for the appellant has further pointed out his objection in relation to claim No. 12 and 32 wherein the learned counsel has stressed that before the District Judge, this objection was specifically taken by the appellants that under Clause 7 any deviation up to the extent of 25% is permissible. If any claim arises out of such deviation that is inadmissible and this Clause 7 has to be read along with Clause 11(c) to be considered for computing any compensation.

22. In reply to this the learned counsel for the respondents submits that appellants were not even conscious regarding existence of Clause 11 (c) while they raised the objection and regarding implication of Clause 11 (c) before the Addl. District Judge. The objections filed before the Addl. District Judge are not explicit. The appellants have not expressly stated as to what extent, claims allowed by the arbilrator were inadmissible. No calculations or indications have been given in the objections to facilitate the Additional District Judge to arrive at a conclusion as canvassed by the appellants themselves. The respondents have further stated that even in the memo of appeal, they have not raised any grievance regarding implication of Clause 11 (c) and therefore, this aspect of the case of the appellant that Clause 11 (c) has any application in the case has been canvassed by the learned counsel for the appellant for the first time at the time of filing of the written submission and the arguments. At the time when the learned Additional District Judge was ceased of the matter, this matter was never canvassed before the learned Additional District Judge. The Addl. District Judge was not to see the award as an appellate authority. He was to assess that if the arbitrator has committed any mischief none of the objections raised by the appellants come within the definition of misconduct, and therefore, the learned Addl. District Judge was right in not interfering with the award at the instance of the appellants as canvassed by them. The award being non-speaking, it was bounden duty of the appellants to have pointed out the misconduct committed by the arbitrator from the award itself, that has not been indicated in the objection, appeal and written submissions also, therefore, the case of the appellant is not liable to succeed.

23. The findings of the learned Additional District Judge when looked into in relation to claim No. 12 in paragraph 25 of the judgment shows that it has been recorded by the court that by looking at the award it does not appear that Clause 7 of the contract has been overlooked by the arbitrator. Learned Additional Sessions Judge has not even quoted the requirement of Clause 7. No finding regarding implication of Clause 7 of the contract and relevance of Clause 11 (c) has been gone into. Therefore, the decision of the learned Additional District Judge suffers from the vice of non-consideration and, therefore, the same is not liable to be sustained and is, therefore, set aside and for reconsideration on this particular claim, the matter requires to be remitted back.

24. Learned counsel for the appellants has raised objection regarding claim no. 32. In this regard, the objection of the appellants is that in terms of Clause 11(c) of the General Conditions of Contract, the decision of the Commander, Works Engineer in between the parties was final and such matters could not have been referred to the arbitrator and the matter was beyond the jurisdiction of the arbitrator in this regard. This objection has been taken up by the appellants in their written submissions and appeal also.

25. Learned counsel for the appellant has urged that Addl. District Judge has not said that he is handicapped in deciding the objection raised by the appellant under Clause 11(a) and 11(c) because no details of any decision of the Commander, Works Engineer has been filed. The-learned Addl. District Judge has very simply stated that no misconduct has been committed by the arbitrator without examining Clauses 11(a) and 11(c). Learned counsel for the appellant stated that all the objections were taken before the arbitrator and it was the bounden duty of the learned District Judge to have saved the award and should have seen all the objections along with relevant documents taken before the arbitrator and the arbitrator has not looked into the same and the learned Addl. District Judge was required to go into meticulously in every part of the record. Learned counsel for the respondents in reply to these arguments have stated that District Judge does not sit as court of appeal and he is only to examine the award. If from the looking at the award, he finds out misconduct, then he is to interfere with the award and not otherwise. Further the objection does not contain any such decision of the Commander, Works Engineer which was filed before the arbitrator. Unless the District Judge was informed that any such decision of the Commander. Works Engineer was filed before the arbitrator, how he can be conscious of the fact and has gone into the record.

26. In reply, the learned counsel for the respondents has furtherurged that objection raised by the appellants before the learned Addl. District Judge states that arbitrator has not considered Clauses 11(a) and 11(c) of the General Conditions of Contract and it has also been con-. tended that in terms of these clauses, the decision of the Commander, Works Engineer was final and binding but no such decision was ever produced either before the District Judge or before this Court, therefore, in absence of any such decision being produced before the Addl. District Judge, he was right in saying that there was no violation of Clauses 11(a) and 11(c). Neither date nor any particulars of any such decision of the Commander, Works Engineer has been communicated to the Addl. District Judge which will oust the jurisdiction of the arbitrator and unless such details were given, it cannot be said that appellants can convincingly urge that Clauses 11 (a) and 11 (c) ousted the jurisdiction of the arbitrator. Learned counsel for the respondents submits that appellants are projecting a case that in cases of any extension granted by the concerned Engineer, no claim is admissible but specific clause itself says that as and when there is any suspension of work, contractor shall be entitled to compensation. What is only barred in Clause 11 (c) is the compensation arising as a result of extension granted. Unless it is established in clear term that compensation which is being claimed is the result of the extension granted under Clauses 11 (a) and 11 (b) then, only argument of the learned counsel for the appellant can be admissible but in the instant case contractor is claiming compensation on account of suspension of the work ordered by the concerned Engineer. The claim of the contractor is not in relation to the loss occasioned as a result of the extension granted. The loss resulting to the extension granted would be the price escalation which might have occurred during that period etc. The remaining machinery and labour idle is not covered by Clause 11 (c). These extensions are granted because of their fault and this extension is to obviate the penalties which are provided under the contract for delayed execution of the contract and these extensions have no other significance at all. the appellant was required to specifically plead that for the reasons contained in Clauses 11 (a) and 11 (b), the same extension was granted and but for that extension under Clause 11 (c) no compensation is admissible. No details of any such extension and compensation as claimed by the contractor has been set up either before the Addl. District Judge or before this court. Further, no order of the concerned Engineer attaching finality under Clause 70 of the General conditions of Contract has been produced either before the District Judge or before this Court to oust the jurisdiction of the arbitrator. Broadly speaking according to the respondents, the objection raised by the appellants were on non-reading of the different clauses by passing the final award but no details and instances were ever quoted and brought to the notice of the District Judge and not even before this Court to establish the misconduct of the arbitrator.

27. Learned counsel for the respondents has read from the award that arbitrator has heard examined and considered the written submissions, oral arguments and written evidence produced before him. He has proceeded to publish final award. Thus by looking at the award, it could not be said that arbitrator has not considered the relevant material and therefore according to the learned counsel for the respondents, the learned District Judge was right in saying that while looking at the award, no misconduct appears and it has also been observed in the award that contract has been understood by all the three parties and there is no dispute with regard to the contents of the affidavit.

28. The objection of the parties in relating to claim No. 32 when examined then from paragraph No. 39 of the judgment it is seen that once again the learned Additional District Judge has committed the same error and has not discussed Clauses 11 (a) and 11 (c). Unless he discussed the implication of Clauses 11 (a) and 11 (c) of the contract, he could not have decided the effect of these clauses. Whether by reading these clauses the jurisdiction of the arbitrator is ousted or not. Unless the court gave a finding that the jurisdiction was not ousted by Clause 11 (a) and 11 (c) in relation to this claim, he could not have upheld the award. Therefore, the matter requires to be remitted to the learned Additional District Judge for reconsideration on this count also.

29. In the result, the appeal of the Union of India so far as it relates to claims Nos. 5, 12, 14, 32 and 34 is accepted because the learned Additional District Judge has neither cared to read and discuss the proper clauses which were incorporated in the objections raised by the Union of India and then find whether the implication of those clauses had the effect of ousting of the jurisdiction of the arbitrator. This is within the domain of the court to see whether the arbitrator has acted within its jurisdiction or outside the jurisdiction. To that extent the court was required to adjudicate. The court having failed to consider this matter, the matter is remitted back for reconsideration.

30. Now, the appeal of the contractor is taken up for consideration. This appeal relates to claim No. 13 and 31.

31. The appeal of the contractor relates to claim No. 13 and the learned Addl. District Judge has said in relation to claim No. 13 that arbitrator has not given reasons as to on what grounds, the award has been passed. Learned counsel for the appellant has stated that since the award was non-speaking asking for the reasons in the award was asking for moon. Since the parties have agreed for passing of non-speaking award, arbitrator passed the non-speaking award and therefore, it could not be said that any reasons could be asked for by the learned Addl. District Judge in relation to the award in question.

32. Learned counsel for the appellant submits that learned Addl. District Judge has gone wrong where the claim for Rs. 44 lacs were rejected, then the amount claimed by the Union of India to the tune of Rs. 81,843.88 was not added in their claim. It was required to be added in their favour and having not added in their favour, the learned District Judge have added and this addition was impermissible because if the claim deserves rejection then that was not required to be added in favour of the Union of India because claim of the appellant was rejected and it should have been rejected simply and it could not have been gone in the Head of the Union of India.

33. Learned counsel for the respondent has submitted that in terms of the contract, if slabs are rejected then costs of removal has to be put on the head of the Contractor and it was on this head, this amount has been awarded to the Union of India and rightly so, because for any rejection, the Union of India can charge costs for removal.

34. Learned Additional District Judge in paragraph 55 of the order has said that the arbitrator has given no cogent reasons for not accepting the claim-regarding 44 slabs. When the learned Judge has observed that no reasons have been given by the arbitrator in this regard then the learned Judge has forgotten that the award was unreasoned one and there were no reasons stated by the arbitrator and the learned Additional District Judge has committed an error in considering that the award was an unreasoned award. The approach of the learned Additional District Judge was wrong. The decision of this claim has become inter-related to claim No. 31 because these claims are inter-related. Therefore, the matter is liable to be reconsidered by the court below in relation to claims No. 13 and 31. This appeal also requires to be remitted.

35. In the result, both these appeals are accepted in part. The decision of the learned Additional District Judge in relations to claims Nos. 5, 12, 14, 32 and 34 in the appeal of the Union of India and the decision of the court below on claims Nos. 13 and 31 in the appeal of the contractor is reversed. The Court will examine the matter in relation to the objections raised by the panics and would see whether the arbitrator has committed any jurisdictional error in relation to Clauses 21G, 11(c) and 7 of the contract and adjudicate the matter afresh in accordance with law. As regards the rest of the claims, neither of the parties has raised any objection. Therefore, the judgment of the learned Additional District Judge becomes final qua those claims.

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